Management Discussion and AnalysisPage 65 GAO/AIMD-00-76 IRS’ Fiscal Year 1999 Financial Statements INTERNAL REVENUE SERVICE Management Discussion and Analysis For the Fiscal Year Ended
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Page 65 GAO/AIMD-00-76 IRS’ Fiscal Year 1999 Financial Statements
INTERNAL REVENUE SERVICE
Management Discussion and Analysis
For the Fiscal Year Ended September 30, 1999
MANAGEMENT CHALLENGES
Most Unpaid Assessments are Not Receivables and are Largely Uncollectable
(continued)
These assessments result primarily from the Service’s various enforcement programs to
promote voluntary compliance such as examination, under reporter, substitute for
return, and combined annual wage reporting Due to the lack of agreement, these
compliance assessments are less likely to have potential for future collection than the
unpaid assessments that are considered federal taxes receivable
The remaining $77 billion of unpaid assessments represent federal taxes receivable
About $56 billion (73 percent) of this balance is estimated to be uncollectible due
primarily to the taxpayer's economic situation, such as individual taxpayers who are
unemployed, or have other financial problems However, IRS may continue collection
action for 10 years after the assessment or longer under certain conditions Thus these
accounts may still ultimately have some collection potential if the taxpayer's economic
condition improves About $21 billion, or about 27 percent, of federal taxes receivable
is estimated to be collectible Components of the collectible balance include installment
agreements with estates and individuals, confirmed payment plans through bankruptcy,
as well as relatively newer amounts due from individuals and businesses who have a
history of compliance
Exhibit 6 depicts the amounts of the taxes receivable balance that is considered
collectible and uncollectible as of September 30, 1999
Exhibit 6
Components of IRS’ $77 Billion of Taxes Receivable
(Dollars in Billions)
It is also important to note that the unpaid assessment balance consists of the unpaid
assessed tax, penalty and interest, as well as accrued penalty and interest computed
through September 30, 1999 About $148 billion (about 64 percent) of the unpaid
assessment balance as of September 30, 1999 represents interest and penalties, as
depicted in Exhibit 7, which are also largely uncollectible
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